Curaleaf Holdings Inc (OTCMKTS:CURLF) has announced that it struck an acquisition deal worth $70 million for Acres Cannabis which runs cannabis cultivation facilities as well as extraction and production labs.
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Acres cannabis has its cannabis operations in Nevada including a dispensary. According to the announcement, Curaleaf will acquire Acres Cannabis for $70 million. The deal is part of the company’s plans to scale up its business through vertical integration. Such developments have become more common in the cannabis industry and it will likely result in the existence of dominant cannabis firms in each region and possibly in each state.
The acquisition will significantly boost Curaleaf’s operations in Nevada because Acres Cannabis facilities including the dispensary and cannabis cultivation facilities will become part of Curaleaf. Acres Cannabis earns between $25 and $35 million in annual revenue which means that it will add significant value to Curaleaf.
“With two acquisitions announced over the past month (total ~$100 million) at relatively attractive valuations, CURA also appears to be accelerating its M&A activity, which we believe should be welcomed by investors,” stated Robert Fagan, an analyst at GMP Securities.
Fagan believes that Curaleaf’s decision to acquire Acres Cannabis is an attractive move because it also aligns with the company’s past acquisitions where it acquired private cannabis operators in the U.S. GMP Securities has also raised its price target for Curaleaf following Acres Cannabis’ pro-forma contribution with an estimated $34 million in sales and $10 million EBITDA. He also revealed that GMP Securities uses on 25x its $312 million 2020 EBITDA forecast to derive its target price.
Acres Cannabis was launched in 2014 and its main business was cannabis cultivation on a 37-acre piece of land in Nevada. Its cannabis and cannabis products initially targeted Las Vegas consumers. The company